With Another Likely Rate Cut, Turkey’s Central Bank Tempts Fate

The Turkish central bank's policy of cutting interest rates amid rising inflation and a weakening currency will probably make both problems worse by spurring additional capital flight and deterring investment. The Central Bank of Turkey (CBRT) is widely expected to make its second consecutive monthly cut to interest rates during its Oct. 21 meeting, which follows last week’s purge of bank officials who had resisted such rate decreases. On Oct. 13, President Recep Tayyip Erdogan fired three members of the CBRT’s monetary policy committee who had pushed back against his calls to lower interest rates. The market’s reaction to the latest CBRT shake-up was almost instantaneous, with the Turkish lira’s exchange rate falling by 3% over the past week on top of the currency’s more than 20% depreciation previously this year. ...